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1. BHARTI AIRTEL LTD BUY
Bharti Airtel Ltd, one of world’s leading providers of telecommunication services with
presence in all the 22 telecom circles in India, and operations in Sri Lanka, Bangladesh
and Africa released their consolidated Q2FY11 results on 10
The key takeaways from the result are
• Net Revenue stood at Rs. 152bn as against 103bn, an increase of 47% on Y
while Net Profit stood at Rs. 16.6bn as against Rs. 22.6bn, an decline of 26% on Y
basis.
• Operating margin stood at 34% as compared to 42% last year. This decline was due
to lower margin business of Zain, South Africa, Net Profit marg
compared to 22% last year.
• The Africa revenue stood at Rs. 39bn for the second quarter ended Sep 30 against Rs.
9.6bn in the previous quarter.
• The effective tax rate increased to 25.5% from 10.6% last year, mainly as a result of
higher taxation structure in Africa.
• The company retained its leadership with 143mn
representing a market share of 21%.
Based on P/E multiple of 15, the fair value per share for t
out to Rs 369.
Financial Snapshot
Projections (Rs. Mn) Q2FY10 Q2FY11
Net Revenue 103,785 152,150
Total Income 103,975 152,319
EBIDTA 43,194 51,379
EBIDTA % 42% 34%
PAT after MI 22,630 16,612
NPM % 22% 11%
EPS Rs 6 4
BVPS Rs
ROE %
PER x
P/B Ratio
BHARTI AIRTEL LTD BUY
of telecommunication services with
ircles in India, and operations in Sri Lanka, Bangladesh
consolidated Q2FY11 results on 10th
Nov 2010
Rs. 152bn as against 103bn, an increase of 47% on Y-o-Y basis,
Net Profit stood at Rs. 16.6bn as against Rs. 22.6bn, an decline of 26% on Y-o-Y
Operating margin stood at 34% as compared to 42% last year. This decline was due
Net Profit margin stood at 11% as
The Africa revenue stood at Rs. 39bn for the second quarter ended Sep 30 against Rs.
.6% last year, mainly as a result of
The company retained its leadership with 143mn Indian subscriber base,
, the fair value per share for the company works
Bharti Airtel plans to launch 3G services in Q3 FY11
Recommendations <= 1 year
Strong Buy
Buy
Hold
Reduce
Sell
Strong Buy – Expected Returns > 20% p.a.
Buy – Expected Returns from 10 to 20% p.a.
Hold – Expected Returns from 0 % to 10% p.a.
Reduce – Expected Returns from 0 % to 10% p.a. with possible
downside risk
Sell – Returns < 0 %
BSE / NSE Code
CMP Rs (15th Nov’10)
Market Cap ( Rs mn)
52 Week High-low
Bharti Airtel Ltd
Sensex
Nifty
STOCK RETURN (%)
STOCK DATA
% chg FY09A FY10A
47% 373,521 418,295
46% 379,496 423,066
19% 158,613 173,015
42% 41%
-27% 78,590 91,631
21% 22%
-27% 21 24
77 105
27% 23%
November 16, 2010
Bharti Airtel plans to launch 3G services in Q3 FY11
<= 1 year 1 - 2 yrs 2 - 5 yrs
Expected Returns > 20% p.a.
Expected Returns from 10 to 20% p.a.
Expected Returns from 0 % to 10% p.a.
Expected Returns from 0 % to 10% p.a. with possible
30D 3M 6M 1Y
-10% -4% 17% 2%
0% 12% 17% 21%
0% 12% 18% 23%
532454/BHARTIARTL
310
1,175,336
377/230
% chg FY11E FY12E
12% 524,150 672,393
11% 528,303 674,410
9% 165,642 209,178
32% 31%
17% 80,486 93,363
15% 14%
17% 21 25
37% 125 148
17% 17%
14.6 12.6
2.5 2.1

2. OTHER HIGHLIGHTS
The Q2FY11 was the first full quarter reflecting the African operations; the first quarter incorporated only 23 days of the
Africa operations effective from June 8, 2010. The revenues from mobile services represented 83.4% of the total revenues,
while non-voice revenue contributed to approximately 14.2
and Net Profit margins stood lower at 34% and 11% respectively from 42% and 22% in last year
operating expenses and higher access & interconnection charges in African business
in India declined by 20% to Rs. 202 a month while the Minutes of usage increased just 1% to 454. ARPU in Africa fell 1%
from the previous quarter to $7.40. For Q2 FY11, Bharti Airtel
Even as the Mobile Number Portability is expected to be a reality soon, high
quality should help the company maintain its market share. Bharti Airtel plans to launch 3G services in India i
will enable it to augment its revenues by offering various data services. It provides a great potential as current broadband
subscriber base is just around 10.8mn. Also, the company is in the process of implementing its low cost model in thei
African operations. Bharti Airtel has already signed IT and customer service outsourcing deals and is having negotiations
with other operators for network sharing agreements. These initiatives will
Bharti Airtel to increase their subscriber base by offering competitive tariffs
Based on a P/E multiple of 15, the fair value per share for t
We recommend a ‘BUY’ rating on the stock.
Financial Analysis and Projections
Particulars (Rs Mn)
Net Revenue
Other Income
Total Income
Operating Expenditure
Depreciation
EBIT
EBIT Margin (%)
Interest
Profit Before Tax
Less: Tax
PAT after MI
PAT Margin (%)
ROE (%)
EPS (Rs)
BVPS (Rs)
Valuation Ratios (x)
P/E
P/B
the African operations; the first quarter incorporated only 23 days of the
evenues from mobile services represented 83.4% of the total revenues,
voice revenue contributed to approximately 14.2% of the total revenues for the quarter. The Operating profit
at 34% and 11% respectively from 42% and 22% in last year mainly due to high
and higher access & interconnection charges in African business. The average revenue per user (ARPU)
Minutes of usage increased just 1% to 454. ARPU in Africa fell 1%
from the previous quarter to $7.40. For Q2 FY11, Bharti Airtel’s churn rate was 5.9% as against 5.8% in Q1 FY11.
is expected to be a reality soon, high brand recall, network coverage and service
maintain its market share. Bharti Airtel plans to launch 3G services in India in Q3 FY11. This
revenues by offering various data services. It provides a great potential as current broadband
the company is in the process of implementing its low cost model in thei
African operations. Bharti Airtel has already signed IT and customer service outsourcing deals and is having negotiations
. These initiatives will improve the margins going ahead and enable
to increase their subscriber base by offering competitive tariffs.
, the fair value per share for the company works out to Rs 369.
Financial Analysis and Projections
Particulars (Rs Mn) FY08A FY09A FY10A
Net Revenue 270,122 373,521 418,295
Other Income 3,600 5,975 4,771
Total Income 273,723 379,496 423,066
Operating Expenditure 156,422 220,883 250,051
Depreciation 38,102 49,639 65,544
79,198 108,974 107,471
EBIT Margin (%) 29% 29% 26%
Interest 6,083 23,064 1,483
Profit Before Tax 73,115 85,910 108,954
Less: Tax 8,161 5,468 15,339
PAT after MI 63,954 78,590 91,631
PAT Margin (%) 24% 21% 22%
ROE (%) 29% 27% 23%
EPS (Rs) 17 21 24
BVPS (Rs) 57 77 105
Valuation Ratios (x)
November 16, 2010
the African operations; the first quarter incorporated only 23 days of the
evenues from mobile services represented 83.4% of the total revenues,
Operating profit
high
er (ARPU)
Minutes of usage increased just 1% to 454. ARPU in Africa fell 1%
brand recall, network coverage and service
Q3 FY11. This
revenues by offering various data services. It provides a great potential as current broadband
the company is in the process of implementing its low cost model in their
African operations. Bharti Airtel has already signed IT and customer service outsourcing deals and is having negotiations
improve the margins going ahead and enable
Overall customer base
of the company in 19
countries stands at
194.8mn
Indian market share
stood at 21%
African operation
provides significant
growth penetration
with penetration rate
of 40%
FY11E FY12E
524,150 672,393
4,153 2,017
528,303 674,410
362,662 465,232
61,488 68,752
104,153 140,427
20% 21%
12,142 33,695
92,011 106,731
10,063 11,673
80,486 93,363
15% 14%
17% 17%
21 25
125 148
FY11E FY12E
14.6 12.6
2.5 2.1